Economic Miracle: Is Uttar Pradesh Finally On The Move?

For a century now, the economy of Uttar Pradesh (UP) was such a ramshackle pit of derelict despair, from which only bad news emerged, that no news of it was good news for the rest of the country. The most populous province of the union was a depressingly drab, moribund millstone of gloom around the nation's neck. The fact that it housed the soul of our civilisation seemed more like melancholy fiction, scripted by dacoity, maladministration, lawlessness, corruption and backwardness.

So, when Prime Minister Narendra Modi announced the Ganga Gas Pipeline Project in 2016, in his constituency of Varanasi in eastern UP, most dismissed it as little more than a sop to his constituents. When Chief Minister Yogi Adityanath set the gold standard globally in effectively tackling the pandemic in 2020-21, this bureaucratic achievement was viewed as a desperate flash in the pan. So too, the launching of a slew of major infrastructure projects in the state from 2014 onwards. Even when LuLu Group opened one the largest malls in the country in Lucknow, in 2022, naysayers were quick to denigrate its significance by posting videos of low footfalls in it.

It was easier to believe that conditions in the state would never improve, than to see if any material development was, in fact, taking place in UP. Yet, two recent publications by the Reserve Bank of India (RBI) indicate that a centennial transformation is, indeed, starting to take root in UP. One is the Handbook of Statistics on Indian States from late 2025, and the other is the State Finances – A Study of Budgets of January 2026. The copious data contained in both texts tells its own story of how a benighted state, pushed from 2014 by a determined central government, and manfully pulled since 2017 by a complementary state government, may be shaking off the sloth of ages for good.

The first step was to study a state's major indicator of economic robustness or gloom: its debt. For this, the increase in a state's debt, or outstanding liabilities, in the period 2016-2026 was plotted against the change in its proportion to the total debt of all large states combined. To utter surprise, and as a chart below shows, UP stood out all on its own in a positive way. Its position is marked in yellow.

This is an easy chart to read. Follow the x-axis horizontally from left to right to see how much the debt of a state bloated in percentage terms in this decade. We note that UP has pole position, along with Gujarat, having only doubled its debt in this period. On the other hand, the debt in Telangana has risen dangerously by nearly five times.

Now follow the y-axis vertically. Any value above zero means that a state's debt has increased in proportion to the total in ten years. The higher the number the worse it is has performed on this metric, and Tamil Nadu tops the list. A negative value, on the other hand, is a good sign, and means that debt growth is lower than average. Here, we see that Uttar Pradesh has shown the largest decline as a percentage of the total, meaning, that its debt has grown the least, relatively.

To understand this in absolute terms, UP's debt for almost two decades, from 2008 to 2026, was plotted in linear fashion. A curious trend emerged.

As the chart above shows, the rate of UP's debt accumulation rose sharply from 2014 and has settled into a firm trend since 2018. The first date marks the moment when the Bharatiya Janata Party (BJP) swept UP to win a majority in the general elections. The second date, 2018, marks the moment when a double-engine sarkar truly came into play in the state, after the BJP swept UP in the 2017 assembly elections.

Now, the absolutely wrong way to read this trend shift would be to say that it represents the advent of reckless borrowing. No, on the contrary, the trend shift marks the period from when targeted spending, driven by lendings from the central government, began in UP. This marks the first, serious attempt to kickstart UP's economy in the modern era.

So, how is this experiment faring? An excellent way to quantify this is to study how the gross value addition (GVA) of the state changed over time. GVA shows how much new value has been added by goods and services to an economy; it is a measure of true productive value since it subtracts the cost of production from the total cost. Here is how the gross GVA chart for UP looks like for the period 2012-2025 (blue line). All figures are in constant prices to account for inflation.

Note how UP's blue line first takes off from the old trend after 2014, and then, following a brief dip during the pandemic, rises at a much higher rate as a result of investments and lendings. This is positive, material change at a very large scale. For perspective, look at how the old trend maintains its slow trajectory. Indeed, if the old trend persisted into the pandemic, recovery from the ensuing economic slump would have taken many more years than the one year the BJP took.

For contrast, Kerala's GVA is also plotted for the same period (orange line). Note how, devoid of any serious planning, and imprisoned by an inchoate ideology, the nation's healthiest state stumbles depressingly along a morose, 'secular state of growth': one not too different from what UP had to suffer until 2014. The inference is clear: change for the better began in UP only when it cast off its socialist shackles.

One benefit with adopting the GVA approach is that it permits analysis by economic sectors: primary, secondary and tertiary; to wit, agriculture, industry and services. Again, Kerala is used as a comparison because, in some ways, it is like UP in that the former was also poorly industrialised, lacked adequate infrastructure, was investment-unfriendly, and because, in contrast, Kerala outranks UP by a fair margin when it comes to human development indices. Also, both are remittance economies even if Kerala is one to a much higher degree. Such a comparison permits analysts to examine changes (improvements, really) in an economy subjected to a decade of focussed planning, funding and project implementation.

First, agriculture.

Between 2012 and 2014, GVA from agriculture was on a mildly declining trend, as the dashed yellow line above indicates. But from that point on, the trend began to reverse and rise, first slowly and steadily until the pandemic hiccup, and then, a takeoff which is still ongoing. People mocked Mr Modi during the initial years of his tenure when he announced 'packages' to UP; they called it a political stunt. But now, after a decade, the results speak for themselves.

This good news notwithstanding, there will be many who say that the comparison with Kerala is wrong, that apples are being compared to oranges because UP is so much larger than Kerala, and because the conditions in the two states are starkly different.

Is that true? No, because value addition is value addition irrespective of conditions. Still, just to dispel misleading and factually incorrect arguments, the same agriculture GVA data for both states was plotted on a per capita basis. The results, though, give an even more encouraging picture of progress in UP, and, as a chart below shows, an even more bleak picture of the abysmal state of agriculture in Kerala.

Note how the blue line declined serially from 2013 to 2015, bottomed out as soon as the initial policies started being implemented by the central government, and then took off on a steep new rising trend as soon as the worst of the pandemic was over. It is as if UP was just waiting to be primed in the right way, with the right, sustained diligence.

In contrast, see how agriculture GVA in Kerala actually declined from 2013 to 2016, when the new Left government tried to institute some damage control. The results are patchy because, whilst a further decline was averted, and some minor improvements were seen, the contribution of the agricultural sector in Kerala has yet to rise back up to the peak it dropped from in 2013. In the same time, UP has zoomed ahead, with its per capita agriculture GVA crossing above Kerala in 2018, and preparing to be double of the Kerala figure in another year or two.

Second, manufacturing.

The chart below speaks for itself. Note the steep upward spike from 2015 onwards, followed by a consistent rising trend from 2021. Once again, we note from the speed of response that UP responds very positively to good policies which are implemented well. Ironically, the Kerala data shows that it too benefited from the new central policies post-2014 but that, unlike UP, it failed to capitalise on this golden opportunity.

Third, services.

The abject state of the services sector in UP prior to 2014 can be seen from the fact that whilst its population is six times larger than Kerala, its services GVA in 2012 was only around 50 per cent larger. Nonetheless, in the ensuing 12 years, service sector GVA in UP has adopted a steep, sustained, rising trend, with the gap between it and Kerala starting to yawn.

Yet for all that good news, there will still be a legion of sceptics and critics who say that these are just numbers, and that there is nothing happening on the ground. Well, a solitary metric (of many) is enough to dispel such baseless notions: facilities for cold storage of agricultural produce.

In today's world, if an underdeveloped economy is to grow, then its agricultural sector has to grow, and an agricultural sector can grow only if its cold storage sector grows. Agro-industry was to walk in step with the farmer if both, together, are to add bountiful, vital, crucial GVA to that economy.

In absolute terms, today, UP is second only to Punjab in cold storage capacity. In per capita terms, as a chart below shows, it is in a league of its own and set to go past Punjab in a few years. Any state below the grey, dashed average line can do better.

These are centennial developments with a centennial impact. Residents of the state offer anecdotal evidence to substantiate this data set. They speak of sprawling cold storage facilities lining the swanky new expressways that now crisscross UP. There is other data too, like for fruits, vegetables, rice or milk, for example, where UP is slowly becoming a leading producer any way you look at it. To top it all, UP now beats the big four (Maharashtra, Gujarat, Tamil Nadu and Karnataka) when it comes to capital expenditure.

But how exactly is this magic happening? What's the secret formula?

The answer is simple: by consistently maintaining the largest revenue surplus in the country, by far. As a result, the UP government is largely able to avoid using debt for revenue expenditure. This is a sea-change from the era before 2014 when, although UP was able to maintain a tiny revenue surplus, the spending on capital expenditure was still pitiably meagre. In the past decade, though, UP has been able to maintain a sterling, burgeoning, healthy revenue surplus, whilst channelling borrowings mainly towards capital expenditure. This is what generates revenues. This is what generates cross-sectoral value addition. And this is what prevents a descent into a debt trap.

This is top flight development planning and economics. No other state comes close to this level of fiscal prudence allied with targeted spending, not even Gujarat, which has the next best record for strictly maintaining a revenue surplus plus capital expenditure. Look at the chart below. UP's revenue surplus is marked in blue, and Gujarat's in orange.

For centuries, UP lay prostrate, tethered by history and ideology. But now, it is coming awake. Its residents are swiftly learning that profits speak louder than dogma. Much louder. And finally, the noble people of Uttar Pradesh are preparing to have their voices heard across the subcontinent, in joy.

As a result, it is entirely possible that, in a decade or so, if political and policy continuity is firmly maintained, analysts, commentators, the public and experts will be talking about an 'Uttar Pradesh Model' in glowing terms. Now that would be an Amrit Kaal of Amrit Kaals.